Economic Survey: India must free grain stocks if food prices rise

India's state-run grain procurement agencies must free some grains in the open market if food prices accelerate, the finance ministry said in a report on Thursday. 

Food prices rose 18% in the first week of February, weighing heavily on overall inflation which has crossed the central bank''s forecast of 8.5%.

The finance ministry, in its annual survey of the economy for fiscal year to March 2010, said state-run Food Corp of India and other firms should release wheat and rice from its warehouses when the gap between food and non-food inflations goes above a certain "critical level."

The government, facing mounting criticism from opposition parties, in its railway budget on Wednesday cut freight rates for grains to tame inflation.

The survey said a 44% drop in sugar output to 14.7 million tonnes in the year to September also contributed to rise in food prices.